Navigating the UK trade deal was a straightforward task; tackling China trade negotiations promises to be significantly more complex.
Upending Expectations: The Real Deal with US-China Trade Talks in Geneva
As the Trump administration prepares for high-profile meetings with Chinese officials in Geneva, the hype surrounding positive vibes from the recent UK trade deal might need a reality check.
In a nutshell, "Let's keep the hype in check," advises Wendy Cutler, a former US trade negotiator who currently serves as vice president of the Asia Society Policy Institute. Tariffs are sky-high, tensions are escalating, and unwinding them? Well, easier said than done.
Trump's got a longstanding aversion to trade deficits, that sneaky situation when the US buys more from another country than it sells. It's not hard to fathom why China, representing the second-largest economy and a manufacturing powerhouse, ranks as the country with the largest US trade deficit, amounting to a whopping $300 billion in 2020.
Trump's response? Grab that sledgehammer and slam tariffs. Tariffs starting at 145% on most products are nothing to sneeze at, and China hit back with a minimum tariff of 125% on US goods. Smarting economy? Check. Bruised ego? Also check.
Businesses, investors, and consumers from both countries are chomping at the bit, hoping for the situation to improve. The Geneva talks mark the first high-level meeting between US and Chinese government officials during Trump's second term, and there's hope it will help ease the tension. But the prospects are murky at best.
The UK Deal: Small Win or Little to Show?
Expect Cutler to flash the UK trade deal as a Foreign Policy 101 demonstration to the Chinese, showing that "their policy is working" and also highlighting that other countries share their concerns with China. But don't be dazzled by the sparkle - the Brits have relatively low tariffs on their exports, starting at just 10%, which remain level, despite the "deal." A slight tariff break for some cars and the possibility of other carveouts seem to be the meatiest parts of the agreement.
"It's basically balanced trade," Cutler boldly claims, comparing the UK's situation with the colossal beast that is China.
The Best Possible Scenario
They say hope, in the face of adversity, springs eternal. But not many believe that the Geneva talks will bring US and Chinese tariffs back to pre-Trump era levels. Treasury Secretary Scott Bessent set the bar low when he admitted earlier this week that the upcoming discussions will most likely focus on de-escalation rather than a grand trade agreement.
In a bizarre turn of events, Trump contradicted himself on Thursday, hinting at possible tariff cuts on Chinese goods, but later walked back his statement, insisting that tariffs will down, but won't get any lower than they are now. Confused yet? Don't be.
Susan Shirk, research professor at UC San Diego's School of Global Policy and Strategy, believes these talks could signal a decreasing trend for extreme tariffs, either to zero or a minimal level. In a Roseanne-esque twist of events, China is apparently acting more disciplined this time around, prompting Shirk to believe that "they're not likely to mess it up."
Shirk hopes that China will demonstrate a good-faith effort to address export flooding issues, not just in the US, but globally.
The Worst Possible Scenario
Here's where things start to get a bit apocalyptic. Expert voices such as Cutler and Shirk agree that a downward spiral of bad-tempered interactions and heightened rhetoric could derail the talks, much like the fiasco that unfolded during the Biden administration's talks with Chinese officials in Alaska.
"The worst thing that could happen is a massive blowup, with the media on hand to report it," warns Shirk. If you're looking for some high drama and fierce verbal combat, you might get your wish.
On the less disastrous, more realistic side, the worst-case scenario could involve the US and China fully entrenching their hard-line positions, which would leave the door wide open for even higher tariffs to rain down. So buckle up, folks - it's going to be a bumpy ride.
- Despite the positive vibes from the UK trade deal, Wendy Cutler advises keeping expectations in check for the US-China trade talks, as tariffs remain high and unwinding them is a challenging task.
- In a potential best-case scenario for the US-China Geneva talks, tariffs might decrease to minimal levels, improving the business and investing landscapes for both countries.
- The worst-case scenario for the US-China Geneva talks could lead to a heated exchange of words and actions, resulting in increased tariffs and further escalating tensions, with potentially damaging consequences for the general news and finance sectors.
